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Alternative Investments

Best Non-Traded REITs

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Best Non-Traded REITs

Real Estate Offering Update: CityVest Has Launched Catalyst Access Fund With 20%-25% Target Annual Returns (Accredited Investors Only).

Benzinga’s Favorite Non-Traded REITs

Apartment Growth REIT

Minimum Investment

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$5,000

Get started securely through Apartment Growth REIT’s website

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1 Minute Review

Since inception, The RealtyMogul Apartment Growth REIT has made quarterly distributions equating to 4.5% annualized based on purchase price.

The Apartment Growth REIT is a public, non-traded REIT that invests in apartment buildings located in resilient markets that can offer current income and solid growth potential. The REIT’s primary objective is to realize capital appreciation in the value of its investments over the long term through the renovation and repositioning of the multifamily properties as well as to pay attractive and stable cash distributions to stockholders.

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1st Streit Office

Minimum Investment

$5,000

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Get started securely through 1st Streit Office’s website

1 Minute Review

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Streitwise has one available REIT Offering to investors of all wealth levels. This $81 million AUM REIT provides investors a diversified portfolio of stable institutional-quality commercial buildings and has distributed 20 straight quarters of over 8% annualized returns. This portfolio has moderate leverage (51%) and over $5 million skin-in-the-game.

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Growth and Income REIT

Best For

Commercial Real Estate

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Minimum Investment

$5,000

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Get started securely through Growth and Income REIT’s website

1 Minute Review

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The Fund is a public, non-traded Fund that seeks to primarily make equity investments in commercial real estate properties across key U.S. markets and property types. The Fund’s primary investment objective is capital appreciation and, as a secondary objective, current income.

No offers will be made to or accepted from investors residing in or located in Nebraska or North Dakota at this time.*

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Income REIT

Minimum Investment

$5,000

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Get started securely through Income REIT’s website

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1 Minute Review

The RealtyMogul Income REIT (Real Estate Investment Trust) is a public, non-traded REIT making equity and debt investments in commercial real estate properties diversified by investment type, geography and property type.

The REIT’s primary focus is to provide monthly income to investors by rigorously evaluating numerous investment opportunities to find those that can support the REIT’s distribution target.

Anyone can invest in RealtyMogul’s Income REIT with a minimum investment of just $5,000, regardless of income level or net worth.

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A real estate investment trust (REIT) is a company that owns, operates or finances income-generating real estate. The most common type of REIT is an equity REIT. An equity REIT uses a combination of its own capital and investor contributions to own and operate large commercial real estate portfolios, which are usually spread across multiple geographic markets. 

The real estate in equity REIT portfolios is carefully selected for its ability to generate net income from collected rents, which is distributed to investors (typically as a quarterly dividend). Secondly, REITs can make money when properties in the portfolio appreciate and are then sold, after which time those revenues are also distributed to investors. 

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Most REITs are publicly traded, and the opportunity to generate passive income secured by real estate makes them one of the most popular alternative investments in the real estate asset class. However, the fact that these REITs are publicly traded leaves them vulnerable to stock market volatility. 

However, another type of REIT may provide stability and more predictable returns than a public REIT:  a non-traded REIT.

How Are Non-Traded REITs Regulated?

In spite of the fact that non-traded REITs are not listed on any public exchanges, they are still subject to several layers of government regulation. First of all, they are still required to create an investment prospectus and submit it to the U.S. Securities and Exchange Commission (SEC). Additionally, non-traded REITs are still responsible for complying with the same regulatory report filing requirements of publicly traded REITs. Finally, non-traded REITs are still required by the IRS to pay 90% of any taxable income generated by the REIT to shareholders. 

All these regulations are designed to protect the interest of shareholders and make sure the REIT is being operated properly. In short, an individual REIT’s “non-traded” or “private” status does not release it from an obligation to act fairly, ethically and transparently with the investor’s hard-earned money. 

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Pros and Cons of Non-Traded REITs

As with any investment opportunity, non-traded REITs have a number of different pros and cons. On the pro side, non-traded REITs offer the following potential benefits:

  • High potential payouts
  • Significant tax benefits
  • Equity ownership of real property
  • Diversified portfolio

On the con side, non-traded REITs have potential drawbacks, including:

  • Less regulatory oversight
  • High minimum investment
  • Lack of liquidity for shares-no secondary market
  • Long hold period

Accelerate Your Wealth

Arrived Homes allows retail investors to buy shares of individual rental properties for as little as $100. Arrived Homes acquires properties in some of the fastest-growing rental markets in the country, then sells shares to individual investors who simply collect passive income while waiting for the property to appreciate in value over 5 to 7 years. When the time is right, Arrived Homes sells the property so investors can cash in on the equity they’ve gained over time. Offerings are available to non-accredited investors. Sign up for an account on Arrived Homes to browse available properties and add real estate to your portfolio today.

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Alternative Investments

What is a Self-Directed IRA?

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What is a Self-Directed IRA?

Several decades ago, when American union membership began to decline and private companies started rolling back employee pension programs, the government needed to create a way to allow workers to become investors and independently save for their retirements. One of the solutions they came up with was the individual retirement account, or IRA. There are three basic types of IRAs:

  • Traditional IRA
  • Roth IRA
  • Self-directed IRA 

In a traditional IRA, a worker can elect to have a certain percentage of their salary deducted on a tax-deferred basis and put into the IRA. When the worker reaches retirement age, they can begin withdrawing from their IRA, at which point the withdrawals are subject to taxation. A Roth IRA works in much the same way, except that the contributions are taxed, meaning the investor draws on the proceeds without taxes once they reach retirement. 

Both traditional IRA and Roth IRA contributions are controlled by a private manager who grows the fund’s value by investing in a variety of traditional investments. The individual investor has no control over the what investments are made, and fund managers can only use fund contributions to buy into traditional investment offerings like stocks and bonds.

However, in a self-directed IRA, or SDIRA, accounts are managed by the investors themselves. The SDIRA offers investors a much higher level of control and input over their retirement savings. SDIRA holders are also given more autonomy to put investor contributions into alternative investments, such as real estate or precious metals.

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What Can You Invest in with a Self-Directed IRA? 

In contrast to a traditional or Roth IRA, where all the decisions are made by the fund manager, and they are limited to traditional investments, a self-directed IRA gives investors the ability to put their money into alternative investments. Examples of the kinds of investments you can make with SDIRA contributions include:

  • Real estate
  • Precious metals
  • Private equity offerings
  • Privately held companies

Benefits of a Self-Directed IRA

Self-directed IRAs offer investors tangible benefits over traditional or Roth IRAs. Chief among them is direct control. With a traditional IRA or Roth IRA, an investor puts their money into a box and trusts the fund manager to grow their wealth.  Investors have little input as to what the IRA’s manager does with their money or where they put it. 

Sure, they get statements as to how well their fund is doing, but the early withdrawal fees and lack of liquidity means investors are pretty much stuck with whatever choices the account manager makes. A self-directed IRA investor, by contrast, is allowed to pick and choose what happens with their IRA contributions. So, for a savvy investor, this higher level of control can translate to rapid growth. 

Another significant benefit of the SDIRA is the increased freedom that allows investors to use their IRA contributions to make alternative investments. Many of the alternative investments available to SDIRA holders offer higher potential returns than securities, stocks and bonds. Additionally, the ability to invest in real estate allows IRA investors to grow a portfolio of properties that can generate passive income for them in a way that traditional investments don’t. 

Lastly, the SDIRA offers the investor a greater ability to diversify their portfolio. Theoretically, a SDIRA investor could use half their contributions to make the kind of slow and steady investments of a traditional IRA, while using the other half of their contributions to diversify into higher-yield alternative offerings. 

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Risks of a Self-Directed IRA

The independence and flexibility that comes with a self-directed IRA is a potential benefit for investors, but that doesn’t mean self-directed IRAs are not without risk. First of all, as an investor, if you’re going to decide what to do with your IRA contributions, it’s critical for you to understand investing fundamentals and how they relate to your investment goals. 

Think of it this way: If you’re not an experienced driver, driving your car is probably a lot riskier than buying a bus ticket and leaving the driving to a professional. This risk level is elevated by the fact that you can make alternative investments with your self-directed IRA contributions. 

Alternative investments certainly offer more upside than traditional investments but that upside also comes with more risk. This is after all a retirement account, so if you manage it poorly or make investments that don’t pay off, you’ll only have yourself to blame when there isn’t enough money in the fund to sustain you in retirement. 

Liquidity also is an issue. Even though you have more control over what investments are made with your self-directed IRA contributions, the other penalties for early withdrawal still apply. In most cases, early withdrawals will eliminate all the tax-deferment benefits that come with having an IRA. So, the money you put into your self-directed IRA is pretty much untouchable for you. 

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Even your self-directed IRA will not be completely self-directed. Yes, traditional and Roth IRAs have a fund manager who handles all the transactions. However, your self-directed IRA will still have a “custodian.” This custodian is basically a referee who regulates what self-directed IRA investments you can and can’t make. That’s important because making prohibited transactions is just as serious as early withdrawals. 

How to Open a Self-Directed IRA

There are some brokerages that act as custodians for self-directed IRAs. With that said, most of the larger, more-recognized brokerages don’t offer this service because their business model doesn’t dovetail well with investor-controlled funds. Remember, the brokerages generally earn their commissions on investment offerings they make available to clients. Supervision of clients that make their own investment decisions isn’t something with a lot of financial upside for most brokerages. 

In most cases, you will have to find a company that specializes in supervising self-directed IRAs. The best place to look for these is among banks and trust companies. The catch here is that each company may have its own rules on what the custodian considers an “allowable” investment, so make sure you pick a custodian whose self-directed IRA rules are flexible enough to allow the kind of investments you prefer to be added to your self-directed IRA portfolio. 

With all of this in mind, if you’re not a very experienced investor with a long track record of making successful investments, it’s advisable to hire a financial adviser to help you make investments with your self-directed IRA. They will not only be able to help you develop a coherent investment strategy, their early input should help you avoid making prohibited transactions that your custodian wouldn’t approve. 

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Self-Directed IRA Rules

If you want to have a self-directed IRA, you also need to follow all the rules and regulations related to your IRA. One of the most important rules is regarding “prohibited transactions.” Examples of prohibited self-directed IRA transactions include:

  • Self-dealing. An IRA transaction involving the sale, exchange or rental of self-directed IRA assets with a disqualified person —  basically anyone who is an immediate relative of the self-directed IRA holder. For example, you couldn’t use your self-directed IRA to buy stock in a company run by you, your child or your spouse
  • Using self-directed IRA funds to extend credit, lend money to or otherwise make financial arrangements with a disqualified person
  • The exchange of goods and services for financial consideration between the self-directed IRA and any disqualified person. An example of this is the self-directed IRA holder who had a plumbing company doing a copper repipe on a piece of real estate owned by the IRA holder (or the IRA holder hiring an immediate relative to perform these services).
  • Using self-directed IRA assets to financially benefit or enrich a disqualified person. An example of this would be selling a rental property in your IRA but diverting the funds into your personal bank account instead of back into the IRA.

Any distributions or withdrawals you make from your self-directed IRA must be reported to the federal government. In a traditional IRA, the manager of your fund is responsible for making these reports and making them accurately. In a self-directed IRA, you are responsible for reporting on all distributions and withdrawals. 

Seeing as how the penalties for making prohibited transactions or working with disqualified persons can eliminate the tax breaks that make your self-directed IRA a good investment vehicle, it’s mission-critical that you have a good custodian and follow their instructions. Failure to do so could create a financial mess that takes years to clean up. 

Contribution Limits

If you make an incorrect withdrawal or early distribution, the penalties can be severe. You must also be mindful of the maximum contribution limits you can make to your IRA. For investors older than 50, the maximum annual amount you can contribute to any IRA (traditional, Roth or self-directed) is $7,000. For investors younger than 50, the maximum contribution is $6,000.

Should I Open a Self-Directed IRA?

Both traditional and self-directed IRAs offer several potential benefits to investors. Chief among them is the ability to make investments and build wealth on a tax-deferred basis, which allows you to make larger contributions and grow your wealth more quickly. The question of whether you should open a self-directed IRA depends on several variables. 

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If you prefer alternative investments like real estate to traditional investments like mutual funds or stocks, there may be a benefit to you opening a self-directed IRA. Many of the alternative investments have more upside and a better potential payoff, but that also comes with elevated risk. If you feel comfortable managing this risk and/or have specific knowledge about certain alternative investments, a self-directed IRA could be a great investment vehicle for you. 

It’s important to understand your self-directed IRA is not necessarily a bread-making machine that you just set and forget. Even if you hire a financial adviser to help you, running a self-directed IRA will require a lot of effort and attention on your part. 

You have to be honest with yourself about how much risk you can bear and how much time you have to dedicate to your self-directed IRA. Ultimately, you are the only person who can answer the question about whether a self-directed IRA is right for you. The good news is, there is nothing stopping you from having a traditional IRA and a self-directed IRA at the same time.

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Arrived Homes allows retail investors to buy shares of individual rental properties for as little as $100. Arrived Homes acquires properties in some of the fastest-growing rental markets in the country, then sells shares to individual investors who simply collect passive income while waiting for the property to appreciate in value over 5 to 7 years. When the time is right, Arrived Homes sells the property so investors can cash in on the equity they’ve gained over time. Offerings are available to non-accredited investors. Sign up for an account on Arrived Homes to browse available properties and add real estate to your portfolio today.

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Alternative Investments

Private Equity Real Estate

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Private Equity Real Estate

Investors are always looking for new opportunities to build wealth. This is especially true when it comes to opportunities that allow them to build wealth passively. That’s why investing in private equity real estate is quickly becoming the newest frontier in the world of real estate investing.

What is Private Equity Real Estate?

Private equity real estate investing involves a group of investors putting capital into a fund to acquire real estate assets and then selling them off quickly after the assets appreciate. Private equity real estate funds can be used to buy land and then develop an asset from the ground up or find undervalued assets and increase revenue through a combination of remodeling, improving management and increasing rents. 

Real estate developers are increasingly turning to private equity to fund deals. Private equity can be used to fund the down payment on a project when traditional financing is being used to fund the rest. It can also be used to completely finance a deal when the project doesn’t meet the criteria of a traditional lender. 

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Most traditional banks only finance real estate deals under certain circumstances. When it comes to a preexisting or already built asset, such as an underperforming or poorly managed apartment building, banks don’t like making loans secured by properties with low occupancy rates and may only be willing to finance a smaller portion of the deal. Investors bet on upside; banks typically don’t. 

The type of value-add opportunities with the most upside usually carry too much risk for banks to finance at the same loan-to-value as stabilized properties. If they do, the interest rate will likely be much higher and debt service will eat up profit. 

The same thing holds true on development projects built from the ground up. They only have a pro-forma budget that forecasts what revenue the asset will generate, but the asset still has no track record of performance. 

The cost of developing assets like retail properties, office buildings and industrial parks converged with tight lending standards to create a gap between developers and the capital they need to do deals. Increasingly, private equity real estate funds are bridging that gap. Developers and project sponsors trade equity for capital and minimize the amount of money they have to borrow. 

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Traditionally, access to private equity funding opportunities has been limited to institutional investors like hedge funds, mutual funds or private real estate investment trusts (REITs). However, the traditional private equity model has been turned on its head. The advent of real estate crowdfunding platforms and the fact that there are more real estate opportunities than there are funds looking to finance them has opened the private equity world to a whole new group of investors.

What’s the Difference Between Private Equity Real Estate Investing and REITs?

You might think a private equity real estate fund sounds a lot like a real estate investment trust, and you’re right. The basic structure and the business model of real estate private equity funds and REITs are similar. Private investors contribute money in exchange for equity in real estate with the goal of generating income and diversifying their portfolios. 

Investors usually become limited Class B partners in a limited liability company (LLC) or limited partners in a real estate limited partnership. They take a back seat to their fund’s general partner (or managing member), who manages assets on a day-to-day basis and receives distributions based on income the asset generates. At their core, both REITs and private equity funds are passive investments where investors get direct equity without making management decisions. 

If the asset appreciates, both the private equity fund and the REIT will sell it off, which produces profit for the investors. However, there are significant differences between investing in a private equity real estate fund and a REIT. Chief among them is the fact that most REITs are publicly traded, which offers shareholders higher liquidity. By contrast, exiting a private equity real estate deal early (or without penalty) is almost impossible. 

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Second, and perhaps more importantly, is the minimum investments. Although there are numerous publicly traded REITs open to virtually any investors, private equity funds are almost exclusively available to accredited investors. Because private equity real estate funds try to buy assets and move them in short time periods, they typically have buy-ins in the low to mid six-figure range. Publicly traded REITs, by contrast, have share prices ranging from $5 to $500 and non-traded REITs typically have buy-ins ranging from $1,000 to $5,000. 

If you were to imagine REITs and private equity real estate offerings as luxury cars, a REIT would be a Lexus, while a private equity fund would be a Bently or Rolls Royce. They’re both luxury cars, but one of them is in an entirely different stratosphere when it comes to price and accessibility.

Pros of Private Equity Real Estate Investing

The most tangible and obvious benefit of private equity real estate for individual investors is the upside. If you can afford the buy-ins, you not only have direct ownership of the asset (proportional to your equity share), you participate fully in the profits generated by the asset. The size of your buy-in only increases the potential returns. 

If your private equity fund manager chooses quality assets and manages them effectively, you can reap incredible profits in a short time period on private equity deals. As long as the fund holds the asset for more than one year, your capital gains exposure is limited, or you can defer your tax exposure by investing with a self-directed IRA. In the meantime, you’ll have access to passive income. 

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Additionally, private equity funds are usually highly diversified across several types of properties in different asset classes. Along with the upside potential and passive income, the investor can get equity in a number of different assets for a low price in comparison to scouting them out and buying them individually.

Cons of Private Equity Real Estate Investing

Private real estate investing is not without downsides. This is true of any investment, but you should do a lot of thinking before you buy into a private equity fund. The biggest potential downsides are buy-in costs and illiquidity. Although the hold period on a private equity real estate fund offering may be shorter than some REITs, you’re still pledging hundreds of thousands of dollars to the deal. 

Because it’s a private investment, the secondary market in equity funds will be limited  — if it exists at all. Getting out of a private equity deal early is basically impossible.  Once you’re in, you’re in. It’s also important to realize your initial investment may not be the only time you have to put money in. 

Many private real estate investment funds raise money on an as-needed basis, which means they could hit you up for more capital after your initial investment. This is known as a capital call, and some private funds call for investors to make extra contributions when necessary. The request is not optional. If you miss a capital call, you could lose your entire investment without seeing any gains. 

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Another potential con of private equity real estate investing is fees. Private equity real estate investment funds have very little regulation or oversight, and there is no statutory limit on investor fees. While most funds charge a management fee for overseeing the asset, that may not necessarily be the limit of your out-of-pocket costs. Review your investment agreement carefully before pledging funds.

What Types of Private Equity Real Estate Funds Are There?

Most private equity real estate funds fall into one of the four following categories:

  • Core: Of the four categories, core funds usually carry the lowest risk level. Core funds focus on Class A assets with stable tenant bases and a high resale value. Examples of core investments would be fully leased luxury apartment buildings or office parks in premium real estate markets. Core funds typically offer solid, stable returns, but because they are already fully leased and in premium markets, there is less upside.
  • Value add: Value add funds look for properties with rental upside and unrealized revenue streams. The assets in value-add funds are usually directly overseen by the fund manager or general partner. They typically require an injection of capital for remodeling and upgrades with an eye on increasing rents and the asset’s overall value. Value-add funds usually have medium to high revenue potential but also carry comparatively more risk than core funds. 
  • Core plus: Core plus funds offer a combination of core assets and value-add assets to give investors the best of both worlds when it comes to upside and risk. They offer higher returns than core funds but lower than value add. The extra upside in the investment also elevates the risk profile, but it usually carries less risk than value-add funds. 
  • Opportunistic: Opportunistic funds look for the highest risk opportunities because they offer the highest potential upside. Examples of opportunistic fund opportunities include building from the ground up and underperforming properties in markets that have yet to emerge but are showing early signs of a rebound. If the assets hit their pro-forma targets, investors will reap huge profits from having added tremendous value to assets that were purchased relatively cheaply.

Benzinga’s Best Private Equity Real Estate Investments

If you’re interested in private equity real estate investing but aren’t sure where to look for opportunities, you’re in luck. Check out Benzinga’s favorite private equity real estate investment platforms.

Best For

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Accredited Investors

Minimum Investment

$25,000

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get started securely through CityVest’s website

Disclosure: Must be accredited investing a minimum of $25,000.

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Minimum Investment

$25,000

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1 Minute Review

CityVest is a web-based real estate investment platform that was established to give small-to-medium-sized investors access to real estate investment opportunities that typically require 6-figure minimum investments. CityVest does this by pooling multiple investor contributions into 1 bundle large enough to satisfy the minimum investment requirements of the best institutional private equity real estate investment funds.

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Best For

  • Individual investors seeking access to institutional investments
  • Experienced investors looking to diversify their portfolio
  • Investors seeking investments with strong due diligence and screening

Pros

  • Access to high-performance institutional funds
  • High returns
  • Intense vetting of investment opportunities
  • Third-party due diligence on all funds
  • No registration needed to review investment opportunities
  • Quarterly distributions

Cons

  • Only available to accredited investors
  • Not a lot of investor control of fund options
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Best For

Newer accredited investors

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Minimum Investment

$5,000

get started securely through RealtyMogul’s website

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Fees

Vary based on investment type

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1 Minute Review

This unique online platform enables investors to handle the entire commercial real estate investing process right from their RealtyMogul dashboard. With rigorously vetted property listings, expertly managed REITs, and a commitment to providing top-notch service and support to its members, RealtyMogul makes commercial real estate accessible to everyday investors.

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Best For

  • Newer accredited investors who want access to pre-vetted properties
  • Non-accredited investors seeking consistent cash flow from well-managed REITs
  • Experienced real estate investors who want access to deal-specific information that allows them to perform their own due diligence more easily.

Pros

  • Do everything from finding the investment property through to signing the legal documents and monitoring your portfolio, all in one platform.
  • All properties are pre-vetted through RealtyMogul’s transparent and rigorous due diligence process.
  • Investment minimums as low as $5,000
  • Keep track of investments with regular updates posted directly to your dashboard
  • Automated investing

Cons

  • Individual property marketplace is only open to accredited investors
  • Does not offer portfolio management
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Best For

Accredited Investors

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Minimum Investment

$25,000

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Get started securely through CrowdStreet’s website

Minimum Investment

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$25,000

1 Minute Review

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Crowdstreet is an online real estate investment platform that lets investors choose from a wide range of real estate investment offerings to crowdfund. Crowdstreet investors are free to buy into managed funds, individual buildings or even build a bespoke investment portfolio that includes both kinds of deals.

CrowdStreet’s platform has a diverse range of property types, ranging from multifamily to office, industrial, self-storage and others.

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  • Accredited investors
  • Long-term investors
  • Investors looking to diversify from stocks

Pros

  • User-friendly interface
  • Diverse investment offerings
  • Great investor resources
  • Proven performance history
  • Many offerings eligible for inclusion in self-directed IRA

Cons

  • Accredited investors only
  • Most offerings require a $25,000 minimum investment

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Minimum Investment

$25,000

Get started securely through RealCrowd’s website

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Minimum Investment

$25,000

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1 Minute Review

RealCrowd is an online real estate investment platform geared towards commercial real estate investing. The platform’s mission is as simple as it is audacious: to create a platform that puts investors in the driver’s seat, while at the same time giving them access to the kind of commercial offerings that traditionally have prohibitively high buy-ins. 

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RealCrowd does this by leveraging the power of high technology and crowdfunding. Learn more about its real estate investment now.

Best For

  • Accredited investors
  • Long-term investors
  • Holders of self-directed individual retirement accounts (IRAs)

Pros

  • Equity offerings in commercial real estate
  • Open to contributions from self-directed IRAs
  • Carefully selected properties
  • High potential returns
  • Variety of offerings
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Diverse range of alternative assets

Get started securely through Yieldstreet’s website

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1 Minute Review

Yieldstreet is an online investment platform that specializes in alternative investment offerings designed to generate passive income and wealth for investors. The platform offers a 1-stop shop for a range of alternative investments ranging from real estate to structured notes and even art collections.

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Best For

  • Accredited investors looking to diversify
  • Alternative investments to stocks and bonds
  • Investors looking for passive income

Pros

  • Easy-to-use platform
  • Carefully selected offerings
  • Excellent mobile app
  • Full spectrum of alternative offerings
  • Options for non-accredited investors

Cons

  • Majority of investments only open to accredited investors
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Is Private Equity Real Estate Investing Right for You?

Private equity real estate investments can add significant value to your portfolio and generate income. The question of whether they are right for you depends on a number of factors. If you’re in a place where you are not only accredited but can handle the buy-ins that come with most private equity real estate funds, kudos to you. 

Even if you fall into this category, you will still need to proceed with caution. Remember, the buy-ins are usually high, and you’ll likely be prevented from liquidating your investment for the entirety of the hold period. Then there is the risk factor to consider. That’s why it’s advisable to consult with a reputable financial adviser about your investment goals, risk tolerance and available capital before going forward. 

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If you complete your due diligence and you still like what you see from a private equity real estate fund, move forward and hope for the best. If all goes according to plan, a few years from now you will have made a tidy profit for yourself, all without having to act directly or do the elbow grease that comes with managing real estate assets. 

Arrived Homes allows retail investors to buy shares of individual rental properties for as little as $100. Arrived Homes acquires properties in some of the fastest-growing rental markets in the country, then sells shares to individual investors who simply collect passive income while waiting for the property to appreciate in value over 5 to 7 years. When the time is right, Arrived Homes sells the property so investors can cash in on the equity they’ve gained over time. Offerings are available to non-accredited investors. Sign up for an account on Arrived Homes to browse available properties and add real estate to your portfolio today.

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Alternative Investments

RedSwan Real Estate Investing Platform Review

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RedSwan Real Estate Investing Platform Review

RedSwan: A Perfect Marriage of Fintech and Real Estate?

In the past, if you wanted to invest in CRE, you had two ways to do it. One, you’d buy a property flat out by yourself. The downside is that buying high-performing CRE assets can cost millions of dollars. Even if you financed the building, you’d be looking at decades worth of debt service and having to assume all the headaches of management or to pay for outside management.

The other way to go, and this method has proven to be popular, is to pool your money by joining a group of investors in buying property. Currently, one of the most common ways to do this is to buy into a fund such as a real estate investment trust (REIT). When you buy into REITs, you go onto the books as an equity owner and your equity share would be based on the percentage of the property you owned.

Buying into REITs is less expensive than being a sole proprietor, but it carries other potential complications. First, REIT shareholders have no say over what assets the fund buys and sells. Second, most REITs have hold periods during which shareholders can’t liquidate their investment. These hold periods can last several years. In the rare cases where a REIT has a secondary market, liquidating shares can still be punitive because of early liquidation fees. 

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The RedSwan real estate investing platform seeks to shift that paradigm by giving investors the benefits of real estate investing while offering them the enhanced liquidity of being able to sell shares on the blockchain. 

How Does RedSwan Work? 

When CRE developers seek funds, they turn to a variety of sources. RedSwan is a team of real estate professionals and investment analysts who provide that capital. In addition to having executed over $3 billion worth of CRE transactions, RedSwan’s team brings nearly 70 years of combined experience in CRE to the table. 

Developers who submit properties to RedSwan for funding must undergo an intense vetting process that examines both the developer’s track record and the underlying fundamentals of their proposed deal. In cases where RedSwan’s team feels like the developer lacks the requisite experience or the proposed development doesn’t have the right balance of upside and risk, the platform will not accept it.

If the offering satisfies RedSwan’s vetting requirements, RedSwan will list it as an offering on its platform. When investors buy shares of the offering, they become equity owners in the property, and the platform converts the shareholder’s equity into tokens on a blockchain. 

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Potential Benefits of RedSwan

RedSwan’s founders believe its business model offers several distinct advantages over traditional real estate investing. First, it allows RedSwan to make high Class A and B real estate investment offerings available to small- and medium-sized investors at affordable prices. Secondly, it allows RedSwan investors to have tremendous flexibility. Normally, when you buy into a real estate fund or a property, you have a hold period where your money is locked up. This hold period can last for several years. 

That can be a problem if your financial situation changes, and you want to liquidate your shares to make other financial moves. Some REITs don’t have out clauses or secondary markets where you can liquidate shares. Complicating matters further, the early liquidation of shares in most funds or property offerings (assuming they allow it) can carry significant penalty fees and tax implications.  

RedSwan, in contrast, offers investors the flexibility of a blockchain ecosystem. One year after buying into a RedSwan offering, investors are free to do whatever they like with their tokenized equity through the blockchain. They can sell their property token or leverage it in decentralized financial markets. That means RedSwan investors can borrow money against the value of their property token or lend a portion of their equity out to a third party for interest.

RedSwan investors can have that flexibility while still enjoying the tax benefits of property ownership (depreciation, capital expenditures write offs). So, in a nutshell, RedSwan offers investors the chance to reap the benefits of equity shares in hiqh-quality real estate assets while still enjoying the kind of liquidity that is usually only associated with the stock market. 

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Investment fees are never anyone’s favorite subject, but if you want to invest in the kind of Class A and B offerings RedSwan offers, you will have to pay them. The extensive vetting that RedSwan does of its offerings — site visits, due diligence — costs money. In addition to that, a high level of tech support and full-stack web design goes into operating the RedSwan platform. 

Without investor fees, it would be difficult for the platform to bring you quality offerings or even run the platform at all. With all that in consideration, RedSwan’s annual fee of 1.5% is reasonable and easy to understand. Considering the fact that RedSwan is offering investors a chance to buy into Class A and B offerings that would typically be well outside the reach of an investor with $1,000 to spend, the investor fee is pretty reasonable. 

Thankfully, the people who design modern investment platforms almost universally focus on ease of use. They’ve clearly gotten the message that investors have little patience with a platform they feel like requires a Ph.D to effectively navigate. As you might expect of a platform that combines fintech and real estate investing, RedSwan is incredibly easy to use. 

Sign up is a simple process that requires a two-stage e-mail and mobile number verification. 

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Once that’s done, investors can peruse the RedSwan exchange for the platform’s current offerings. If you find an offering that strikes your fancy, simply click on it and you’ll be taken to a screen that gives you all the offerings’ basic information — internal rate of return (IRR), minimum investment, management fee. Buying into an offering isn’t much more complicated than clicking a link and uploading a payment. 

All in all, RedSwan is an easy-to-use platform that anyone who is comfortable with online applications will be able to use effectively.

Whenever you have a platform like RedSwan that offers such a unique method of real estate investing, the importance of investor education is magnified. It’s clear the founders of RedSwan know this and take investor education seriously. 

A brief trip to RedSwan’s Frequently Asked Questions page will give you an effective primary education on its business model and how the real estate tokenization process works. There is also a wonderful YouTube channel that walks you through how to use the platform. It also offers great insight from the platform’s braintrust. 

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One of the best aspects here is that when you click on individual offerings, you also see a link to the email address of RedSwan’s CEO, Edward Nwokedi and links to members of RedSwan’s management team. You’re not going to get a formulated answer off a script but will connect with someone who is well equipped to answer your question. 

Its News section keeps investors up to date on the world of real estate and fintech with articles about RedSwan offerings and fund-raising efforts as well as educational pieces that cover topics like building a new digital real estate empire and ways that blockchain real estate investments are good for investors. A podcast from Nwokedi specifically deals with tokenization in real estate. 

Reviewing RedSwan’s YouTube channel, its FAQ page and the news articles give investors a thorough understanding of how the platform works and the potential benefits of real estate tokenization. From top to bottom, RedSwan’s investor education provides all the information you’d need to feel comfortable working with this platform. That’s as true for first-time investors as it is for cryptocurrency and blockchain veterans. 

For any investment platform, the quality of the offerings is really the meat and potatoes of the whole affair. This fact is especially true for a platform like RedSwan that wants to hang its hat on the concept of making Class A and B investments available to people and still giving them the flexibility of tokenization. Because realistically, the token is only as good as the offering it’s attached to.

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RedSwan passes this test with flying colors. Clicking on its exchange will reveal a diverse range of offerings in real estate markets all over the country. If you’re the kind of investor who wants to pick and choose your own offerings and create a bespoke portfolio, you’ll love RedSwan. Perhaps the best thing here is the volume of offerings available with buy-ins of only $1,000. Almost all of them are Class A or B residential communities with high upside and IRRs between 14% to 25%.

RedSwan also has two different funds with pre-selected properties for investors who may not be comfortable picking out their own. The RedSwan CRE Value-Add Fund (RSVA) fund has a $1,000 buy-in and features a great mix of the following assets:

  • Office
  • Retail
  • Industrial
  • Multi-family

This highly diversified fund is targeting an IRR between 14% and18% and a 5.5% annual cash yield. This fund is open for investment until July 15, 2022, so if you want to get on board, do it soon.

RedSwan CRE Core Property Fund (RSCP) is a core fund of diversified CRE that seeks to generate investor returns through rental income. The properties in the RSCP fund were carefully selected for their history of achieving high occupancy and offering solid investor returns. The projected IRR is between 8% to 13% with a targeted 4% annual cash yield.  The minimum buy-in for the fund is $1,000; however, the token price is $2 per token, meaning your initial investment will buy 500 shares. The project close date is also July 15, 2022. 

In the case of both funds and the individual properties in the RedSwan portfolios, investors have the flexibility of being able to sell or leverage their token after holding it for one year. Considering the quality of these offerings and the enhanced ability to liquidate tokens if necessary, RedSwan really stands tall among its peers in this industry. The only thing keeping this aspect of RedSwan’s CRE investments from being a five-star section is the lack of offerings for non-accredited investors. 

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Redswan Performance History

Most of RedSwan’s offerings are either still in the period where it is accepting investor contributions or closed too recently to have historical returns. When you take into account the CRE track records of the people who run RedSwan and vet properties for the platform, it’s a good bet that most of these investments will meet or exceed their investment goals. 

That is, of course, no guarantee of success, but the other thing to remember is that you really only have to hold on for 12 months. If you decide after a year that you no longer want to be a RedSwan investor, you can sell it in the blockchain without a penalty.

It’s very clear RedSwan’s founders spent a lot of time trying to build a better mousetrap. It Has taken the least popular aspects of investing in real estate (high buy-ins, long hold periods) and replaced them with the best aspects of the blockchain (high investor flexibility and liquidity). It has done that while still managing to deliver a number of high-quality offerings that would strike the fancy of any real estate investor. 

If RedSwan’s attempt to link the best parts of CRE investing and the blockchain together succeeds, it could lead to a sea-change in the way we invest in real estate. The use of the blockchain also means that theoretically, RedSwan can open up international real estate investment markets to Americans in the same way that it opens American real estate investments to investors all over the world. 

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Overall RedSwan is a great platform with a highly innovative business model and a top notch team at the helm. The idea of buying equity in Class A and B real estate then being able to liquidate or leverage it in the blockchain is enticing.

Arrived Homes allows retail investors to buy shares of individual rental properties for as little as $100. Arrived Homes acquires properties in some of the fastest-growing rental markets in the country, then sells shares to individual investors who simply collect passive income while waiting for the property to appreciate in value over 5 to 7 years. When the time is right, Arrived Homes sells the property so investors can cash in on the equity they’ve gained over time. Offerings are available to non-accredited investors. Sign up for an account on Arrived Homes to browse available properties and add real estate to your portfolio today.

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